Banks on ‘Go Green Mantra’

Corporations worldwide are making a greater push to become eco-friendly. Stringent laws by the government, efforts by environment bodies, and increased consumer awareness have all contributed to this positive trend.

Banks and non-financial institutions have also followed suit, realizing the importance of eco-friendly decision making. This has given rise to a form of banking called Green banking-which takes into account the social and environmental impacts of the bank's activities as well as implementing practices to protect and preserve the environment.

The Current Situation?

Across the world, banks and non-banking financial institutions have taken a cue and are implementing practices to reduce their carbon footprint. Playing their part, these institutions have rolled out alternative eco-friendly initiatives such as investing in and providing greater benefits to eco-friendly companies, as well as creating and supporting green financial funds. Additionally, providing paperless statements to customers, using green IT infrastructure, and encouraging employees to implement greener lifestyles are some more conventional initiatives being undertaken by banks today.

In comparison to banks globally, India still has a long way to go. According to the Yale Environment Performance Index-which ranks countries based on how close countries are to establishing environmental policies-last year, India was ranked at 125. This is set to change with the Indian government making a greater push for greener practices. Under the ‘Green Initiative' for non-banking financial institutions, the day-to-day use of electronic payment systems, elimination of post-dated cheques, and the gradual phase-out of cheques in business transactions is being encouraged. Adding to this, the Ministry of Finance has also directed all public sector banks, financial institutions, and public sector insurance companies to take up e-governance.

Why Go Green?

While banks are warming to the idea of green banking, the reasons to go green are manifold. Besides emerging stricter regulatory and compliance requirements by the government and environmental bodies, consumers themselves are increasingly becoming aware of their carbon footprint. They are implementing eco-friendly practices into their daily lives, while looking to use goods and services of companies that employ green practices and help reduce their impact on the environment.

Technology plays an important role in helping companies go green and experience cost savings. For example, by simply moving from cheques to direct deposits, the federal government of Canada expects to experience $17.4 mn in savings by 2014-15 alone. 1) With the push for greater financial inclusion in India, coupled with growing opportunities in rural India, banks are aggressively expanding their networks through physical branches. 2) This will lead to an exponential increase in the number of bank accounts in India and thus increased consumption of paper. With the availability of mobile phones, banks can offset the foreseeable increase in consumption of paper by leveraging technology to become more eco-friendly.

Additionally, in the wake of rising energy prices, using technology to decrease energy consumption will also allows banks to reap financial benefits. Green banking also enables banks to provide better services to customers while protecting the environment, enhancing their brand image, while increasing customer loyalty.

How Can Banks Go Greener?

In India most leading banks have already made the move to green banking, implementing practices that involve their customers in most instances: Mobile and online banking, availability of paperless statements, SMS transaction alerts, and increasing use of ATMs.

Deploying these practices help banks reduce their carbon footprint and indirectly their customers. However, to further their commitment to helping the environment, banks can also implement the following:

• Dematerialization: Moving beyond paperless banking, banks can reduce their paper consumption associated with delivering and activating cards to share information with cardholders and instead use digital and mobile resources. One such example is by delivering PINs for cards securely over text messages. This not only saves the paper used for printing the PIN, but has a ripple effect, saving postage stamps, envelopes and the energy used to deliver them. Banks can use secure monitoring solutions and electronic invoicing to monitor the personalization and dematerialization processes in real-time and gradually reducing their paper requirements.

• Using Eco-friendly Cards: Using biodegradable materials to produce bank cards also contributes to further reduction in banks' carbon footprint. Banks such as Barclays, Deutsche Post, and Raiffeisen Bank across Europe and Australia along with VISA, VISA Europe, and MasterCard have already begun implementing bio-sourced bank cards made from polylactic acid (PLA). PLA is an environmentally friendly plant starch-based plastic substitute. It is non-petroleum based, biodegradable and compostable, and is also non-toxic if incinerated. PLA is as secured as plastic cards as it is compatible with magnetic stripes and smartcard technologies. Additionally, it can be recycled over and over again without compromising on the quality of the card.

• Green Life Cycle/Backend Green Suppliers: Implementing practices to work with suppliers which employ eco-friendly practices is important. Greener manufacturing practices such as carbon offset, implementing eco-design in the product life cycle and working with eco-friendly suppliers and vendors all reduce the impact of banks on resource consumption and emissions. Furthermore, banks can also employ suppliers who participate in programs that give carbon credits by offsetting greenhouse gas emissions, generated by card production. These programs also support energy saving and renewable energy schemes globally.

The changing customer perspectives to reduce their impact on the environment, stricter laws, rising energy prices and the shift in values of the banks have become greater drivers to become environmentally friendly. Although banks in India have begun taking steps to work towards adopting and implementing green strategies, a lot still needs to be done to make a greater push and ensure a sustainable environment for generations to come.